India Should Take Action Against US Tariff Barrage
Chennai: While the US continues its tariff barrage with its latest Section 301 tariffs, India needs to take action. India should raise the issue of “illegal tariff” in various forums, seek partnerships and send a message to the US that it may reconsider the protection given to US patent holders in India, especially in the pharmaceutical sector, says Abhijit Das, former head of the WTO Center for Studies.
Therefore, the basis of trade negotiations with the USA was reciprocal customs duties and then punitive customs duties. Both of these tariffs were struck down by US courts. We also saw Malaysia withdraw from the trade agreement after the court decision. Why didn’t India withdraw from the negotiations?
What we need to remember is that India-US trade negotiations took place before bilateral tariffs. When Prime Minister Narendra Modi and President Donald Trump met on February 13, 2025, the joint statement mentioned that the two countries would negotiate a bilateral trade agreement.
Meanwhile, first reciprocal tariffs and then punitive tariffs were introduced. These were later abolished and replaced by tariffs under Section 122, which were ruled against by lower courts and are likely to expire by July 24.
The goal of India and the US in these negotiations is to reach an understanding that addresses the interests and concerns of both parties. Malaysia stated that the bilateral trade agreement with the USA was no longer valid after the court decision. However, India is continuing negotiations because it wants to ensure that Section 301 tariffs and future tariffs do not adversely affect its interests.
India’s primary goal is to ensure that its exports face the lowest possible tariffs. It is also important to note that reciprocal tariffs, Section 122 tariffs and the newly announced Section 301 tariffs are against WTO rules.
Reports suggest that India is negotiating to avoid Section 301 tariffs. The United States has imposed tariffs of 10 percent to 12.5 percent on nearly 60 economies, including India, due to labor concerns. Can the US impose additional tariffs under Section 301 for excess capacity?
Section 301 investigations are divided into two parts. Findings on workforce issues have already been published. While India faces 12.5% duty, textile and garment rivals such as Pakistan, Malaysia and Indonesia face 10% duty.
These tariffs may increase further when the findings regarding excess capacity in the second part of the investigation are released. Many countries, including India, are likely to face significantly higher tariffs than the current 10 percent to 12.5 percent.
Even after reciprocal and punitive tariffs, India’s exports were marginally higher in FY26. Should India worry about Section 301 tariffs?
India would not be at a disadvantage if the same level of tariffs were imposed on India and its competitors, especially in labour-intensive sectors such as textiles, leather, gems and jewellery.
However, if India wants lower tariffs on its exports, the US will expect concessions in return. The United States is unlikely to offer tariff reductions without extracting something of value in return.
Are there any guarantees that the US will roll back Section 301 tariffs if a trade deal is signed? If not, why should India continue the talks?
Absolutely nothing is guaranteed under President Trump. There is no certainty or predictability in the U.S. about the tariffs any country’s exports may face.
Whatever is agreed upon today, no one can say with certainty that India will not face higher tariffs in the future for other reasons or under another US law. We have already seen punitive tariffs imposed for issues linked to US geopolitical interests, such as India’s purchase of Russian oil.
Nothing can prevent future tariffs against India or other countries. This risk will continue even after the bilateral trade agreement is concluded.
So should India continue negotiations?
Participating in negotiations is always beneficial. Commercial diplomacy should be given the opportunity.
But India may have missed an opportunity by taking a relatively lenient approach to tariffs that clearly contravene WTO rules. India did not object strongly to these tariffs at the WTO. He could have signaled that he would not passively accept such actions and even hinted that protections afforded to U.S. patent holders, particularly in the pharmaceutical industry, would be reviewed.
Such steps could strengthen India’s bargaining position. Its negotiating position has weakened as India has neither strongly objected to the tariffs nor signaled possible action on intellectual property rights.
Would raising these concerns at the WTO serve any purpose in a situation where the WTO cannot act effectively?
It’s not just about making decisions. It is also about signaling and sending a strong message to the United States.
Had India voiced these concerns and received support from other countries, it might have made the United States think more carefully before resorting to coercive economic measures. Even if the WTO’s paralyzed appeals system prevented effective implementation, India would still have gained bargaining chips and resisted unilateral action.
How will the trade agreement, if signed, affect India’s economic sovereignty and growth? What does India gain in return?
The potential gain is that India’s exports in sectors such as textiles, clothing and leather could increase if India gains customs advantages over its rivals.
But the concessions India may have to make could be significant.
In agriculture, India may need to reduce customs duties on products such as apples, almonds and walnuts. Lower tariffs on soybean oil could negatively impact domestic soybean producers, while lower tariffs on oranges could hurt domestic producers.
The most serious concern is with the Minimum Support Price (MSP) system. The United States has been aggressively raising this issue at the WTO in Geneva and will likely raise it during bilateral negotiations as well.
If India is forced to change its MSP program, the consequences could be severe for rice and wheat farmers. However, there is currently no publicly available information confirming whether MSP is officially part of the negotiations.
Other concerns include restrictions on India’s ability to tax digital transactions and possible demands for changes to patent laws, particularly Section 3(d) of the Patent Act, which prevents patents from being renewed indefinitely.
Any weakening of these patent protections could weaken India’s generic drug industry and eventually increase health care costs for millions of people who depend on affordable drugs.
In summary, the disadvantages seem to outweigh the advantages. What is the status of negotiations with other countries that made agreements with the USA during the mutual tariff period? Did they receive exemptions from subsequent tariffs?
There is little publicly available information.
Countries negotiating reciprocal trade arrangements with the United States were still subject to 10% uniform tariffs under Section 122. It remains unclear how these earlier agreements will be implemented going forward.
One possibility is that the United States could use Section 301 tariffs as leverage to force countries to honor commitments made under previous reciprocal trade arrangements.
Reciprocal tariffs and Section 122 tariffs have faced legal setbacks in US courts. Can Article 301 tariffs also be removed?
It is quite possible that Section 301 tariffs will face legal challenges.
It remains unclear whether US courts will rule against them, but the possibility cannot be ruled out. However, even if Section 301 tariffs are repealed, there are other provisions in U.S. law that could allow future administrations to impose different forms of tariffs.
As someone who negotiates trade deals for India, what advice would you give to the government?
India should have continued negotiations with the US, but also should have clearly communicated through the WTO that reciprocal tariffs and Section 122 tariffs violate WTO rules.
India also needed to work with other countries to create a common front. Additionally, it could signal that continued use of illegal tariffs could force India to reconsider protections afforded to U.S. patent holders, particularly in the pharmaceutical sector.
Such measures could have been implemented in a calibrated manner and would have strengthened India’s position. Instead, the government threw almost all its weight into negotiations. We now have to wait and see whether this approach will result in a fair, balanced and equitable agreement.
Is there still anything India can do at this stage?
It is never too late to raise these concerns in international forums.
It is also not too late to signal that India may reconsider the level of protection afforded to US patent holders if the current tariff regime continues. Such signals could still play an important role in shaping negotiations and improving India’s bargaining position.
